The federal empowerment zone program has little to show for the $100 million it spent over 10 years in some of Chicago's most impoverished neighborhoods.

The federal empowerment zone program has little to show for the $100 million it spent over 10 years in some of Chicago's most impoverished neighborhoods.

Despite isolated success stories, a new study of the once-ballyhooed government experiment in inner-city revitalization shows Chicago lost more than 14,000 jobs and almost 600 businesses within its 14-square-mile empowerment zone between 1995 and 2004, a period when the national economy was, for the most part, booming.

Spread over three non-contiguous areas on the South and West sides and in the Pilsen and Little Village neighborhoods, Chicago's empowerment zone fared even worse than comparably depressed parts of the city, which saw an 11% loss of jobs vs. a nearly 17% decline in the zone, according to the U.S. Government Accountability Office (GAO), the investigative arm of Congress.

Like most other cities, Chicago put the bulk of its empowerment zone funding into non-profit groups for community development projects, such as job training, arts programs, education and housing.

Little was used for economic development, such as helping companies obtain working capital. Only six Chicago companies utilized tax-exempt bonds that required them to be located in the zone and to hire at least 35% of their workers there.

While money spent on community development filled a need, critics say the city lacked a strategy to nurture businesses and create jobs, a fundamental goal of the program. Chicago offered $20,000 grants to help empowerment zone residents buy franchises, with local banks and foundations providing matching funds. But only three were started and just one survived  barely  beyond a few months.

"We're thinking of dissolving. We didn't have enough working capital," says Jacqueline Smith, owner of a PostNet office supply and shipping franchise on Maxwell Street.

That area is more active than when she bought the franchise nearly three years ago, but contracts she hoped to get from local governments and the University of Illinois didn't materialize. "I can't compete against Kinko's," says Ms. Smith. "I didn't reap any benefits from being in an empowerment zone, other than that empowerment zone grant."

Competition for empowerment zone designation was intense after the Clinton administration got Congress to enact the program in 1993. It set aside $1 billion in flexible grants for six cities and several rural areas, along with more than $2.5 billion in tax incentives for companies that were located within or hired residents of a zone.

But none of the original urban empowerment zones achieved across-the-board success with its $100-million grant, and Chicago was one of three cities whose zones saw a decline in both businesses and jobs, according to the GAO report.

"You can't say Chicago managed the program any better or any worse" than other cities, says William Shear, lead investigator on the GAO study.

On the positive side, poverty and unemployment declined significantly in Chicago's empowerment zone. But that probably had more to do with a sharp population drop, particularly in the southern part of the zone, where the demolition of high-rise public housing displaced some of its poorest, out-of-work residents.

Also, Chicago's heavy emphasis on job training may have benefited zone residents but not the zone itself. "People get jobs, a better lifestyle, they move," notes Michael Bennett, executive director of DePaul University's Egan Urban Center and co-principal investigator of the National Empowerment Zone Action Research Project.

Other external factors also had an impact, such as welfare reform, rising housing prices and loss of manufacturers such as Brach's Confections Inc., which employed more than 2,000 in the west portion of the zone a little more than a decade ago.

"Larger forces were at work more than the empowerment zone," says Dan Immergluck, associate professor of city planning at the Georgia Institute of Technology in Atlanta and a longtime observer of urban development in Chicago. "In the scheme of things, $100 million over this period of time, when decisions were being made such as Brach's, it's not enough, and it's not sustained."